A dynamic pricing approach on electricity prices in Indian context

In this paper, we study the mechanism of dynamic pricing of electricity and its opportunities in the Indian context. We compare the economic efficiency of dynamic pricing vis-a-vis the traditional flat tariff of electricity. We analyse various ways in which dynamic tariff can be introduced in the electricity market and we show the Indian experience in this regard. We consider the state of Maharashtra, in particular, to understand how TOD (Time of Day) pricing system has been introduced and how it is more efficient. We develop a mathematical model using pseudo-real data (as per the advice of a renowned sector expert) to show how TOD tariff is more efficient than flat tariff and how RTP (Real Time Pricing) tariff is associated with uncertainty of electricity bills. We further emphasise on how the dynamic pricing system can be modified in order to increase its efficiency.